Background
The Shariah Advisory Council (SAC) of the Securities Commission Malaysia (SC) has, at its 193rd meeting held on 19 January 2017, discussed the status of preference shares whose underlying shares are classified as Shariah-compliant securities. Whilst deliberating the issue, the SAC took note of its existing resolution on the permissibility of basic preference shares which are non-cumulative based on tanazul, which was resolved in its 20th meeting held on 14 July 1999 (Existing Resolution on Preference Shares).
Issue
The issue in discussion was whether preference shares whose underlying shares are classified as Shariah compliant would also be classified as Shariah-compliant securities.
 Resolution
The SAC has resolved that preference shares are classified as Shariah-compliant securities provided that:
 (i) The underlying shares are classified as Shariah-compliant securities; and
 (ii) The preference shares are non-cumulative in accordance with the Existing Resolution on Preference Shares.